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After breaking out of the descending regression channel GBPUSD made a brief move outside the upper Bollinger bands before falling back to current levels. The pair has found some support from the 50% Fibonacci level and has moved sideways since Monday. This is however a mid-range level that could get broken due to the fact that this market is not extended to the downside. Weekly pivot low resistance is at 1.5390 (relatively close to current price). Current levels are therefore more risky and I would be interested in long trades at lower levels, between 1.4962 and 1.5054. With support and resistances so close to each other it’s likely though that this market will be range bound for the rest of the week.

GBPUSD, Daily

The March 18th high created a support level that was strong enough turn GBPUSD higher in the beginning of May. Now this same pivotal candle support coincides with lower daily Bollinger Bands and the 50 day SMA. At the same time Stochastics oscillator is pointing higher after it was oversold. After last two weeks’ downside movement the pair closed yesterday above previous day’s high. When this takes place at support level it is a Bullish signal and should be taken as an alert to look for smaller time frame charts in order identify right levels for buy signal monitoring. However, this has to be taken as a very short term indication as the resistance level at 1.5447 is not very far. This is likely to test the commitment among the buyers should the short term indications prove to be correct. The 50% Fibonacci level is slightly above the aforementioned resistance at 1.5498 while the nearest daily support levels are at 1.5164 and 1.5089.

GBPUSD, 240 min

After hitting the upper Bollinger bands and 50 period SMA, price has fallen back to the level it broke out from the 4h descending regression channel. This level is highlighted by the 50% and 61.8% Fibonacci retracements and at the time of writing price is trading just above the 61.8% Fib level. Hourly chart created a pin bar pointing to a potential reversal and there was an attempt to take the market higher. However over the last two hourly bars the upside momentum has been non-existent and price has corrected lower. The resistance level at 1.5326 (coinciding with 23.6% Fib level) is relatively close and could well be the reason for sluggish performance. Apart from Fibonacci levels the nearest support level is at 1.5210 and coincides with 4h lower Bollinger Bands.

GBPUSD, 240 min

Conclusion

In the weekly context GBPUSD is still relatively close to the upper Bollinger Bands. Also, price trading at 50% Fibonacci retracement points to the fact that this level is mid-range and therefore not the ideal area for a weekly turn around to take place. Also the weekly pivot bar low at 1.5394 is relatively close to the current price and suggests further weakness could be ahead over the coming weeks. However, before that is likely to happen we might see a rally to the 1.5447 resistance as daily time frame has some supporting elements for the pair (lower Bollinger bands, 50 day SMA and historical support at 1.5164 ) and there was a daily buy signal yesterday (a close above previous day high). Support and resistance being relatively close to each other could lead to a range bound market. As per usual, look for lower time frame price action to confirm any trading ideas at support and resistance levels.

Janne Muta
Chief Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

The GBP/USD pair has extended losses to trade around 1.5590 after the German Bundestag approved new Greek bailout negotiations helped the EUR/GBP recover losses.
Technically, next immediate resistance above at 1.5607 and 1.5638 levels. Down side support below at 1.5560 and 1.5400 levels.
Trend oversold conditions withd slightly bearish at the moment.

The GBP/USD is back below 1.56, marking another failure on the part of the bulls to sustain above the same.
Technically, immediate resistance above at 1.5639 and 1.5700 levels. downside support at 1.5550 and 1.5500 levels.
Trend overall looking slightly bearish at the moment.

UK unemployment unexpectedly dropped to a new cycle low of 5.3% in September data, down from 5.4% in August and July’s 5.5%. The consensus had been for an unchanged 5.4% reading. This takes the jobless rate further south of the BoE’s NAIRU (non-accelerating inflation rate of unemployment) threshold of 5.5%. The employment rate, meanwhile, rose to 73.7% the highest since records began in 1971.

Despite this, wage data disappointed: the ex-bonus average household pay packet rose 2.5% y/y in the three months to September, down from the 2.8% increase of August, while the with-bonus figure rose 3.0% y/y, unchanged from August and shy of the median forecast for 3.2%. The weaker wage data has been the main takeaway for markets, with sterling trading weaker in the wake of the release, though with inflation fractionally negative, incomes continue to trend firmly upwards in real terms. The October claimant count has been somewhat overshadowed on this occasion, coming in with a rise of 3.3k, slightly worse than the 1.4k median forecast. The claimant count rate remained unchanged at 2.3%.

GBPUSD is trading just above the 23.6% Fibonacci retracement level after it reacted lower from the proximity of 1.5197 resistance level. It is trading near the upper 4h Bollinger Bands while the 30 period SMA and a consolidation from yesterday appears to give some support. Even though the market turned lower before hitting my intended shorting level I am still looking for short signals at or near 1.1597 resistance (coincides with 38.2% Fibonacci level) with an aim to cover the trade near 1.5060 level.

Please note that times displayed based on local time zone and are from time of writing this report.

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Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

The upside in GBP/USD seems to have found strong resistance around 1.5080, easing to 1.5060 at the time of writing.
Technically, The upside in GBP/USD seems to have found strong resistance around 1.5080, easing to 1.5060 at the time of writing.

The GBP is under pressure ahead of this week’s U.S. FOMC interest rate decision that could provide continued uplift for the USD against the GBP. I would expect some GBPUSD choppy trading as we move closer to Wednesday since also on tap we have some key U.K. data that, if disappoints, could support a Bank of England interest rate hike delay, which in turn could provide some further support for GBPUSD short sellers. I would expect the GBPUSD to remain biased to the downside against the USD in the current macro environment with my technical medium term price targets for the GBPUSD at 1.4955 (S1) with a possible test of the April 20th lows near 1.4890 (S2).

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Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

Today’s main event is the long awaited U.S. Interest Rate Decision. My view is that the U.S. Fed will raise interest rates today. I believe that the Fed understands that if they fail to hike today, the U.S. Fed’s credibility will most certainly be challenged. Let’s not forget that the U.S. Fed has been holding the markets hostage for many months, thereby creating a large amount of uncertainty in the markets with constant talk about the pending interest rate adjustment higher, only to disappoint the markets with no action during the previous meetings. Today’s “potential” rate hike will open the door, in my opinion, for further rate hikes over the coming year. Most professional traders are very aware of this fact and have already been adjusting positions accordingly.

In overnight stock market trading and ahead of today’s important U.S. Fed Interest Rate Decision, global stock markets surged higher, with solid gains in Asian, Europe and Wall Street yesterday. The “pending” increase in U.S. Dollar borrowing cost is viewed by the stock markets as a net positive that the economy is healthy and that growth will continue to follow despite the higher cost of borrowing.

So far today, the USD has consolidated yesterday’s gains, after core CPI data out of the U.S. provided a final conformation of market expectations for the Fed to deliver a long-awaited rate hike later today.

The general market mode for today, I would see it as swinging between “risk-on” and “risk-off” as traders jockey for positions, with high volatility especially during the U.S. FOMC Press Conference scheduled for later tonight at 7:30PM GMT. The heavy price action will be around the FOMC Economic Projections, the FOMC Statement followed by the FOMC Press Conference. Traders will have a long night of trading with plenty of action expected. I wish you all good luck on this historic trading day!

Main Macro Events Today

• EUR CPI data: the final reading of CPI data for November, which should confirm the headline rate at 0.1% y/y (med same) and core inflation at 0.9% y/y. The decline in oil prices remains the main factor weighing on CPI, although core inflation also eased slightly last month, as the drop in basic goods prices is feeding through the production chain. Still, the ECB already reacted to this by easing policy further and ECB’s Coeure said deflation risks are off the table now with the latest set of measures, so the numbers won’t change the policy outlook.

• USD U.S. Industrial Production: November industrial production is out on today and should reveal a 0.2% (median -0.2%) decline which would mark the third strait month of 0.2% drops. Despite the firm November employment report there is some downside risk to industrial production as factory employment declined by 1k and mining employment was down by 11k for the month. We expect capacity utilization at 77.3% (median 77.4%) from 77.5% in October.

• USD U.S. Housing Starts: November housing starts are out today and analyst expect a 1,130k (median 1,133k) headline following a 1,060k headline in October which marked an 11.0% decline from September. Analyst expect permits at 1,150k from 1,161k and completions should rise to 1,000k from 965k in October. The warmer weather through November should lend some upside risk to the release despite the slow down in the already released November NAHB which declined to 62 from 65 in October.

• USD Interest Rate Decision: FOMC made two key changes in the policy statement that put a Fed hike on the table for today, even as it left rates unchanged in October. Fed removed the comment from the September statement that “recent global economic and financial developments may restrain economic activity somewhat” and replaced it with “monitoring” developments. Also said “in determining whether it will be appropriate to raise the target range at its next meeting” Those two changes reversed the dovishness from the September meeting and ostensibly reduced the concerns over the slowdown in China that Chair Yellen mentioned in her presser Statement somewhat at odds with slowing in recent data, however, but acknowledged job gains had slowed while unemployment rate held steady Inflation continues to run the below the Committee’s long run target.

Over the last five trading days and ahead of the build-up towards the U.S. Interest Rate decision, money is seen flowing into the USD. The U.S. buck has held firmer against the JPY, AUD, GBP, CAD, EUR, NZD and the CHF amid the backdrop of strong global stock markets and the fact that the U.S. Fed is widely expected to start the rate lift-off today.

The GBP suffers losses across the board as the latest data from the United Kingdom indicates that the BoE will not make a move to hike the GBP cost of borrowing until possibly 2017. Also, the fact that the BoE worries about a possible rate rise by the Fed today, will put upward pressure on GBP. For the moment, the market will be pricing in an evidentially BoE rate hike after the Fed opens the door first.

The AUD has underperformed since Australia remains vulnerable to the weakness in the global commodities markets.

GBPUSD, Daily (Updated)

The GBP has been trading lower in the initial wake of last week’s December BoE meeting which showed the Monetary Policy Committee was focusing on the recent decline in nominal pay growth, which was taken by markets as a dovish shift in the BoE’s thinking, in turn reducing expectations for BoE rate rift-off anytime soon.

Technically, I remain bearish on GBP against the USD in the current macro environment with my technical short term price targets for the GBPUSD at 1.4955 (S1) with a possible test of the April 20th lows near 1.4890 (S2).

FX Pair : GBPUSD
Supports : 104955
Resistances : 1.53

AUDUSD Daily, (Updated)

The minutes to the RBA’s early-December policy review reaffirmed the view that the central bank is increasingly comfortable with the economic prognosis. Notably the RBA dropped “members judged that monetary policy needed to be accommodative,” although it maintained that the inflation outlook “may afford some scope for a further easing of monetary policy” if needed.

Technically, the AUDUSD is at risk of further medium-term losses, Monday’s drop has so far failed to hold, a price bounce from .716 could leave a lower top near the .7230′s ahead of a breakdown towards .7070 area.

FX Pair : AUDUSD
Supports : 0.7180/0.7070
Resistances : 0.7360/0.7450

Please note that times displayed based on local time zone and are from time of writing this report.

Janne Muta
Chief Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

Today’s trading session will be quiet, as Japanese markets are closed to celebrate the Emperor’s Birthday. We may see some activity around the CAD later today upon the release of the Canadian Core Retail Sales and GDP data. In over night trading, Asian equity markets closed the session mostly higher, while U.S. stocks charged higher posting gains of nearly 1% for the session.

The major USD currency pairs continued to lack direction without any market catalyst on tab to jolt the USD in any meaningful direction. EURUSD remains in a tight range within the 1.09s after marking a one week high near 1.0980's yesterday. USDJPY also appears to be in a narrowly range around 121.00 for a third day, with the sharp volatility seen in the wake of last Friday’s BoJ policy fading away.

Industrial metals and oil prices have been moving higher, as investors’ confidence about the growth prospects in the U.S. and China increases.

Main Macro Events Today

• JPY Japan : Bank Holiday

• GBP United Kingdom Final GDP: Q3 expected to be confirmed at 0.5% q/q and 2.3% y/y

• CAD Core Retail Sales: Analyst expect retail sales values, due later today, to improve 0.8% in October (median 0.6%) following the 0.5% drop in September. The ex-autos sales aggregate is expected to gain 0.5% m/m in October (median +0.5%) after the 0.5% pull-back in September. Gasoline prices fell 2.0% m/m in October, a comparatively modest pull-back compared to the 7.9% plunge in September according to the CPI. Hence, we should see an only modest drag from gas station sales on total and ex-autos sales. Moreover, gasoline prices remain very low relative to a year ago, which could continue to underpin spending along with low interest rates. Vehicle sales were firm through November, which should be supportive of total sales in both October and November.

• CAD October GDP: Analyst expect GDP, due Wednesday, to rise 0.2% in October (median +0.3%) after the 0.5% plunge in September. The projection is driven by an expected boost from the return to production of an oil sands producer that was off-line due to fire in September. That boost is seen offsetting drags from manufacturing, wholesale and housing. But the expected boost from the oil sand producer could be tempered by temporary closures at other refineries (notably Irving Oil in St. John).

• U.S. Durable Goods: November durable goods data is out Wednesday and should reveal a 1.5% (median -0.7%) decline in orders for the month with inventories and sales both remaining unchanged in November. This follows respective October figures of 2.9% for orders with shipments down 1.0% and inventories down 0.3%. Data in line with this forecast would leave the I/S ratio steady at 1.65 from October.

• U.S. Personal Income: November personal income is out Wednesday and analyst expect a 0.3% (median 0.2%) increase in headline income with consumption up 0.3% (median 0.3%) as well. This would follow October figures of 0.4% for income and 0.1% for consumption which prompted a bounce in the savings rate to 5.6% from 5.3% in September. For price data analyst expect the PCE Chain Price Index to remain unchanged with the core up 0.2%, matching the November CPI figures.

Please note that times displayed based on local time zone and are from time of writing this report.

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.